Victoria Falls, Botswana Falls, Victoria

Our group vision and purpose is to be the most trusted and inspiring connector of positive change, through a highly relevant, convenient and responsive network of people and channels that enables opportunities to be created, financed, transacted and secured wherever we operate.

INTEGRATED ANNUAL REPORT 2017 5 02 LEADERSHIP REPORT

Last year we made a fresh promise to all customers and stakeholders During the year, Capricorn Group acquired a 68.7% shareholding in of the group: To be a catalyst of sustainable opportunities. This year, CIHB, which in turn holds 100% of the share capital in Bank Gaborone. our promise was tested by a tough economic environment, however, Capricorn Group also bought 97.9% of the shares in CCHZ, which owns we believe that the group has succeeded in creating short- and 100% of the share capital of . long-term value from the opportunities that emerged.

Sustainable opportunities created Read more about the new group structure on page 22. in 2017

Group expansion and diversification As these entities had been part of CIH for several years, the During the year under review the group expanded its footprint integration into Capricorn Group was seamless and immediate, beyond Namibia through the acquisition of Capricorn Investment and took place with no system integration complexities or other Holdings (Botswana) and Cavmont Capital Holdings , from associated acquisition costs. CIH. Capricorn Group is now a truly regional group with a diversified footprint that enables us to better mitigate risks GIPF transaction and collaborate in executing larger business deals through the pooling of resources such as funding, technology and human capital. A 2017 highlight was the acquisition of a 25% interest in Capricorn It will also promote regional presence and awareness by introducing Group by the Government Institutions Pension Fund (GIPF), which scale to the Capricorn brand. made the fund our second largest shareholder. The transaction was largely facilitated by CIH, which remains our largest shareholder despite selling a 15.5% shareholding in Capricorn Group to GIPF. GIPF bought a further 9.5% from Namibia Strategic Investments (Pty) Ltd, a consortium of Namibian investors.

6 CAPRICORN INVESTMENT GROUP LTD Okavango Delta, Botswana Okavango

“We want to continue delivering relevant solutions and convenient products with a responsive network of people and channels that enables opportunities to be created.” – Thinus Prinsloo at the launch of the Capricorn Group’s new name and brand, September 2016

INTEGRATED ANNUAL REPORT 2017 7 02 LEADERSHIP REPORT

Following the transaction, CIH’s shareholding in Capricorn Group Welwitschia Insurance Brokers and Sanlam Namibia decreased from 56.0% to 40.5%, whereas GIPF’s shareholding increased to 26%. CIH and GIPF will both fulfil the role of shareholders On 1 July 2016, the sale of Welwitschia Insurance Brokers (WIB) to of reference and, in this role, provide funding support to the group in Sanlam Namibia was finalised. We believe that WIB’s insurance general and more specifically to its banking operations. activities are a better future fit with Sanlam Namibia, in which the group holds a 29.5% share. WIB and Sanlam Namibia continue their GIPF showed its commitment to fulfilling the role of shareholder close working relationship with Bank Windhoek, to the benefit of of reference by offering immediate long-term senior debt funding of their mutual clients through the entities’ bancassurance model. This N$1.3 billion to the group. Similarly, CIH also committed to provide has resulted in a combined offering with improved service to clients 10-year debt funding amounting to N$900 million. This enabled the and more streamlined processes. group to make available committed contingent funding facilities to its three operating banks. This has significantly mitigated the Capricorn Private Wealth Suite launched liquidity risk within the group – a material matter that is of major importance for Capricorn Group. Bank Windhoek and Capricorn Asset Management launched the pilot phase of the Capricorn Private Wealth Suite in June 2017. It is GIPF funded the transaction with the proceeds from the disposal an exclusive offering delivered by a dedicated team of private of foreign investments, injecting much needed investment and bankers, wealth managers and service specialists. This team works liquidity into the Namibian economy. The transaction also results together to service customers’ needs comprehensively and in more inclusive ownership of the financial services industry. seamlessly, at the location convenient to the customer. Branded Capricorn Group has a 100% ownership score according to the elements that form part of the offering include, among others, a Namibian Financial Sector Charter (NFSC) scorecard after the share debit and credit card, electronic banking platform, mobile banking acquisition by GIPF. Its current Nam-mic relationship is also application, dedicated service desk and suite access. included in this score. The offering focuses on retaining and attracting affluent customers.

8 CAPRICORN INVESTMENT GROUP LTD The Capricorn Way defined 2017 performance overview

Following the expansion and the rebranding of the Capricorn Group, The Namibian economy experienced one of its biggest challenges there was a need to align the different entities and create a common since Independence with gross domestic product (GDP) declining understanding of what the group stands for. The Capricorn Way was significantly from a 3.3% growth during the prior financial year of developed as a shared culture and understanding of how we do things. the group, to a contraction of 1.8% during the first three quarters It was written in such a way as to remain relevant as we grow and of the group’s current financial year, based on the quarterly figures change as a group and as we move from one leadership generation published. to the next. The Namibian banking sector has been significantly impacted by We developed The Capricorn Way to be universal and inclusive so this downturn, which resulted in a sharp reduction in private sector that it is relevant to the different generations and cultures of the credit extension (PSCE) and severe market liquidity constraints. countries that we operate in. As a consequence, cost of funding increased substantially as the market competed for limited liquid funds and growth opportunities We operate in an extremely competitive environment in a number were stifled by the stagnant economy. of countries, but there is one distinctive advantage we have, and that is our culture. Notwithstanding the challenging operating environment, the group delivered a solid performance with operating profit before tax for We believe that The Capricorn Way will inspire collective thinking and the year ended 30 June 2017 increasing by 2.0% compared to an aligned culture which, together, enables us to make connections the prior year. On a normalised basis, growth in operating profit and create outcomes that will contribute to the economies of the before tax is 4.0% compared to the year ending 30 June 2016. countries in which we operate. Any reference to “normalised” means that, for the sake of meaningful comparison, the effect of the following significant We also updated the Capricorn Group code of ethics and conduct policy once-off transactions and acquisitions have been excluded from to align with The Capricorn Way. Read more about The Capricorn Way actual account balances, to arrive at normalised balances: in the sustainability and ethics committee report on page 88. • once-off forex trading income on the trading of Angolan kwanza in the prior year • prior year income, expenditure and profit of Welwitschia Insurance Brokers (WIB), which was sold on 1 July 2016 • income, expenditure and profit of the Botswana and Zambia subsidiaries since acquisition on 1 January 2017 • assets and liabilities of the Botswana and Zambia subsidiaries as at 30 June 2017

INTEGRATED ANNUAL REPORT 2017 9 02 LEADERSHIP REPORT

The table below sets out the salient features of the group’s financial performance over the past five years.

2013 2014 2015 2016 2017 Five-year CAGR* Statement of comprehensive income (N$’000) Total income 1,437,645 1,736,630 2,079,559 2,411,946 2,647,682 16.3% Operating profit 648,083 792,874 979,023 1,171,014 1,194,679 18.3% Profit for the year after tax 493,271 624,915 753,002 905,048 917,621 17.9% Total comprehensive income for the year 515,630 639,159 781,488 938,513 931,055 17.4% Earnings per share (cents) 108 125 150 181 180 15.2% Dividend per share (cents) 33 44 53 66 68 22.2%

Statement of financial position (N$’000) Total assets 20,938,608 24,318,268 28,608,842 32,333,653 42,920,914 17.8% Total and advances to customers 17,651,962 20,245,395 23,621,871 26,598,023 33,433,922 16.6% Total deposits 16,915,652 18,782,411 21,993,998 23,724,128 31,571,561 15.0% Net asset value per share (cents) 532 617 728 856 1,003 19.2%

Performance indicators (%) Return on average equity 21.9 21.9 22.4 22.9 19.5 Return on average assets 2.5 2.8 2.8 3.0 2.4 Impairment charges as a % of average gross loans and advances 0.16 0.15 0.26 0.24 0.19 Non-interest income as % of operating income 37.1 39.8 40.2 40.6 38.5 Cost to income ratio 54.1 53.6 51.6 50.2 53.9 Closing share price (cents) at 30 June 1,015 1,115 1,556 1,724 1,809 Price to book ratio at closing price per share 1.9 1.8 2.1 2.0 1.8 Price to earnings ratio at closing price per share 9.4 8.9 10.3 9.5 10.0

Capital adequacy (%) Total risk-based capital ratio 16.6 15.8 15.8 15.8 16.8

* Compound annual growth rate

Net interest income increased by 13.1% to N$1,649.5 million Impairment charges for bad and doubtful debts decreased by 4.6% to (2016: N$1,458.1 million) largely as a result of the acquisition of N$58.0 million (2016: N$60.8 million). Impairment charges for Bank CIHB and CCHZ, which contributed 9.8% to the year-on-year growth. Windhoek decreased by 23.4% to N$46.6 million (2016: N$60.8 million) The subdued normalised growth in net interest of 3.3% is mainly and as a percentage of gross advances decreased from 0.24% to 0.17%. due to a significant increase in the cost of funding as a result of the liquidity shortage experienced in the Namibian market during the Capricorn Group’s book remains healthy considering the current year under review combined with a slowdown in the growth of economic environment, and is testimony to the group’s prudent interest-bearing assets. management and the benefits of a decentralised decision-making model. Both Bank Gaborone and Cavmont Bank’s impairment charges are also within accepted norms.

10 CAPRICORN INVESTMENT GROUP LTD Non-interest income increased by 4.7% to N$998.2 million (2016: N$953.8 million). On a normalised basis, non-interest income increased by 7.4% compared to the prior year. Transaction fee income increased by 24.6% following robust growth from cards and electronic channels. Initiatives such as the launch of the Capricorn Private Wealth Suite are expected to provide further momentum to this income stream. As a direct result of the contraction in the Namibian economy, the good growth in transaction fee income was partially offset by a contraction in trading revenue.

Non-interest income per category

2017

Transaction-based fee income Cards & electronic channels Net trading income

Asset management fees Commission and other insurance income Other

2016

Transaction-based fee income Cards and electronic channels

Net trading income Commission and other insurance income Asset management fees Other

INTEGRATED ANNUAL REPORT 2017 11 02 LEADERSHIP REPORT

Normalised operating expenses increased by 7.1% to N$1,214.9 million (2016: N$1,134.1 million), evidencing management’s focus to control costs. The cost to income ratio increased from 50.2% to 53.9% as a result of the higher cost to income ratios of the subsidiaries in Botswana and Zambia.

Growth in operating expenses

1,500,000 1,450,000 1,400,000 82,972 86,281 46,022 1,350,000 1,300,000 91,621

N 1,250,000 1,395,005 1,200,000

1,150,000 1,180,153 1,100 000 CI CC I E

Operating expenses increased by 18.2% to N$1,395.0 million Income from associates decreased by 19.6% to N$78.1 million (2016: N$1,180.2 million), which is mainly due to the acquisition (2016: N$97.1 million) and contributed 8.5% (2016: 10.7%) to profit of CIHB and CCHZ together with an increase in technology- and after tax. The year-on-year decrease is mainly due to a decrease transaction-related expenses. The increase in technology-related in current year profit reported by Sanlam Namibia, following a expenses relates to the continued investment in IT infrastructure number of large group life claims settled during the year under review. and service offerings, resulting in an increase well above inflation. This has been offset by cost savings across the group due to a focus Other comprehensive income is mainly derived from the valuation on efficiencies and operational excellence, specifically in the muted of foreign-currency-denominated available-for-sale financial assets. normalised growth in staff costs of 4%. The significant reduction in other comprehensive income, compared to the previous year, is due to foreign currency exchange differences arising from the strengthening of the Namibia dollar against the US dollar during the period under review.

12 CAPRICORN INVESTMENT GROUP LTD Loans and advances grew by 25.7% to N$33.4 billion (2016: N$26.6 billion). The strong growth is mainly due to the acquisition of the two banking entities during the year under review. CIHB and CCHZ contributed N$4.1 billion (12.2%) and N$833.5 million (2.5%) respectively to N$33.4 billion total advances. The acquisitions also resulted in an increase in non-performing loans (NPLs), as illustrated in the graph below, however NPLs within CIHB and CCHZ are within their respective market norms and did not result in a corresponding increase in impairment charges.

Group gross loans and advances vs impairments 35,000 2.5% 35,000 2.5% 30,000 30,000 2.0% 2.0% 25,000 25,000 20,000 1.5% 20,000 1.5% 15,000 N$ million 15,000 1.0% N$ million 1.0% 10,000 10,000 0.5% 5,000 0.5% 5,000 0 0.0% 0 0.0% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Gross loans and advances to customers Gross loans and advances to customers NPLs as % of gross loans and advances NPLs as % of gross loans and advances Loan loss rate Loan loss rate Bank Windhoek gross loans and advances vs impairments 30,000 2.5% 30,000 2.5%

25,000 25,000 2.0% 2.0% 20,000 20,000 1.5% 1.5% 15,000 15,000

N$ million 1.0% N$ million 10,000 1.0% 10,000

5,000 0.5% 5,000 0.5%

0 0.0% 0 0.0% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

INTEGRATED ANNUAL REPORT 2017 13 02 LEADERSHIP REPORT

Excluding CIHB and CCHZ, loans and advances grew to N$28.5 billion (2016: N$26.6 billion), mirroring the decline in Namibian credit to the private sector. NPLs as a percentage of gross advances of Bank Windhoek remains stable with a slight increase from 1.32% to 1.44%.

Total funding increased by 34.9% to N$37.2 billion (2016: N$27.6 billion) which is also mainly due to the acquisition of Bank Gaborone and Cavmont Bank. On a normalised basis, Bank Windhoek’s funding increased by 7.6% largely due to good growth in term and notice deposits, as well as senior debt. Although funding growth has been challenging in the current economic environment, the group has managed to lengthen its funding maturity profile and decreased its dependency on short-term funding.

Funding contribution

40,000

35,000 11% Debt securities 3% 30,000 IFC and DEG funding 19% NCDs and PNs 25,000 9% 11% 4% Term and notice deposits 24% 20,000 10% 23% 29% 5% Demand deposits 26% 22% N 15,000 19% 17% Current and savings accounts 20% 16% 13% 10,000 18% 18% 25% 22% 5,000 25% 29% 28% 28% 26% 0

Bank Windhoek • The launch of an e-money functionality through the Bank Windhoek EasyWallet – the e-wallet solution enables customers The group’s leading operating subsidiary, Bank Windhoek, is the to send money to any MTC number via a mobile phone. Recipients largest locally owned bank and second largest in do not need a Bank Windhoek account and can immediately Namibia. The reduction in government spending impacted the withdraw cash at any Bank Windhoek ATM or access prepaid entire business community and highlighted the local economy’s level services and buy airtime or electricity. The points of presence for of dependency on government’s financial health. cashing out EasyWallets increased to almost 400 locations countrywide by the end of the financial year. Bank Windhoek experienced the impact most acutely in the cost of • The launch of GoPay, a mobile payment solution for fuel. More than funding. Our own ability to fund growth was limited due to past 80 Namibian fuel merchants signed up for the service, which allows focus on assets, triggering the strategic shift towards raising Bank Windhoek customers to pay for fuel using their existing cell deposits as a key performance metric. This focus, combined with the phone banking platform. The solution is cashless, cardless and can work done on the customer value proposition and digital focus areas be actioned remotely, thereby reducing costs, such as ATM fees for in the past few years, delivered the following: cash withdrawals, and improving convenience. • The launch of the Capricorn Private Wealth Suite mentioned • The launch of Solo Bank for children – the Solo Bank is an earlier in the report – the new offering is not expected to yield account that is tailor-made for children of 18 years and younger high volumes of new business, but it will be a strong retention and has savings and transactional facilities. This account mechanism, and creates a capability that can be rolled out to encourages children to start managing their finances from an other market segments and business units. early age. The focus of the Solo Bank is to teach financial literacy to young Namibians.

14 CAPRICORN INVESTMENT GROUP LTD Bank Windhoek’s net profit after tax amounted to N$775.4 million Cavmont Bank (2016: N$762.9 million) – an increase of 1.6%. Transactional income showed steady growth and we were able to manage the arrears Cavmont Bank celebrated 25 years of banking in 2016 and won book well. 13 local and international awards and accolades for excellence in . The bank also received an unsolicited investment-grade Social and political drivers have muted demand, whereas economic credit rating from the Credit Rating Agency Zambia in 2016. This factors have put pressure on margins. rating, coupled with improved profitability, enables us to pursue capital markets activities, and to consider long-term development Bancassurance is one of the main opportunities for Bank Windhoek finance institution (DFI) funding and third-party credit line going forward and we are ensuring that it is well integrated with our opportunities that are all aimed at expansion and growth. current offerings and customer acquisition strategy. This gives us the opportunity to diversify revenue and increase advisory service income. The bank’s portfolio quality has remained consistent, funding costs have been well below market average and operating expenses have been tightly managed, despite market challenges and constraints, to Bank Gaborone position the bank for growth. Bank Gaborone celebrated its 10th anniversary in 2016 and was the strongest performer in the group for the 2017 financial year. It showed The bank’s active customer base doubled to 62,000 since 2014 due 28.4% growth in revenue and 83.2% improvement in operating profit. to its strong track record in providing award-winning solutions and service. This included the Imiti Ikula Children’s account and the Bank Gaborone’s focus remains on building and nurturing Imbasela account, which is targeted at marketeers, small business relationships. Evidence of our success was apparent when Bank owners and savings groups. Gaborone was rated the best bank for customer care in Botswana by KPMG in the banking industry customer satisfaction survey. Cavmont Bank is also one of the first financial institutions in Zambia to successfully offer the e-Tax platform, which allows existing or walk-in During the year the bank opened two branches, one in Palapye and customers to remit taxes electronically to the regulator. the other in Maun, bringing the total number of branches to nine and thereby extending its network of relationships. The bank also We have qualified SME managers in our Cavmont Bank branches who improved customer experience by introducing a new Internet can support small businesses in making their contribution to national banking system that is user friendly with enhanced security features. economic growth through insights-driven advice and solutions.

The market environment in Botswana remains challenging, with In the past two years, Cavmont Bank has made significant progress the closure of the parastatal mining operation, Bamagwato towards improving access to financial services, and continues to find Concessions Ltd, as a significant lowlight. The bank was affected ways to penetrate the unbanked market – a market that holds a by resulting job losses. significant opportunity for the bank. Further investment in mobile banking services will be a key element of this drive, supported by a Since the market is more concentrated from a population perspective strong social media presence. than in Namibia, costs can be managed more efficiently. Bank Gaborone, with a 6% market share, provides ample opportunity for growth, especially when considering that the bank is well positioned from a service and reputation perspective.

INTEGRATED ANNUAL REPORT 2017 15 02 LEADERSHIP REPORT

Capricorn Asset Management (CAM) and Capricorn Customer value proposition (CVP) Unit Trust Management (CUTM) The most significant outcome from this initiative – to create a Assets under management increased by 13.2% (2016: 0.14%) during compelling customer value proposition in all aspects of the business – the year under review, primarily with investments in the low-risk asset was the launch of the Capricorn Private Wealth Suite. This offering classes. Revenue increased by 2.5% (2016: 17.3%) and operating aims to serve the affluent customers of the group, mainly through profit decreased by 2.0% (2016: 18.1% increase). Customer retention Bank Windhoek and Capricorn Asset Management. was high, but there was a significant shift from investment in actively managed funds to money market funds due to perceived market risk. The offering was developed following the use of a customer journey mapping tool to design customer experiences and to ensure that The refreshment of Capricorn Asset Management’s brand was services, processes and procedures meet a desired customer outcome. done early in 2017. This included the renaming of the Bank Further CVP outcomes include a data-driven pipeline for new offerings, Windhoek Unit Trusts to the Capricorn Unit Trusts, thereby aligning based on the appropriate success metrics for customer centricity. the asset management and unit trust businesses with the overall group identity. From Employee value proposition (EVP) to Citizenship A further highlight was the Caliber Capital unlisted investment solution, which became the largest, non-listed, debt capital fund in Our success in delivering on Capricorn Group’s brand promise and Namibia with 42 pension fund investors and total committed capital strategy relies on the skills and engagement of our employees. of N$400 million. Therefore, Capricorn Group’s internal focus over the past two years was on building an EVP that differentiates us from the market by The integrated Capricorn Private Wealth Suite offering, which is bringing together the expectations and responsibilities of both developing a strong sales focus with the emphasis on digital employee and employer. channels, is expected to generate additional income for CAM. Citizenship is our way of honouring the employment promise and Namib Bou captures the shared dedication required by employee and employer in creating an enriched workplace. In March 2017, we introduced Phase two of the affordable housing development at Ondangwa The Capricorn Way to the organisation, which shapes a new shared delivered 146 houses. During the year, a feasibility study for the phase culture that encourages exceptional performance and living positive three houses, board approval of the development and the completion change through specific behaviours. A further Citizenship focus was of the servicing of 274 phase three erven were completed. We aim to on enhancing the coaching skills of line management in Namibia and have a maximum of 35 houses under construction at any time. The Botswana and the development of a coaching framework. The group’s first 35 houses were sold within two weeks of going to market. current leadership framework has also been reviewed to align with the group’s strategy and The Capricorn Way. In February 2017, 29 new Strategy progress and performance leadership delegates joined a leadership development programme at Reflecting on the strategic focus areas up to the end of this financial the Capricorn Talent Academy, with The Capricorn Way incorporated year, we have gained deeper and more strategic – rather than into the curriculum. tactical – insights to guide our future conversations. We have achieved the following in the process of embedding our initiatives: A future step to embed The Capricorn Way is the development of a survey as an employee engagement tool and a way to measure the climate and culture within the group. The behaviour elements of The Capricorn Way have also been incorporated into the performance management system.

16 CAPRICORN INVESTMENT GROUP LTD The group’s Citizenship strategy for 2017 to 2019 was finalised in Benefits realisation management June 2017 with citizenship engagement, operational excellence and climate/health as the three main principles guiding the strategy. The primary goal of this initiative was to ensure that management clearly defines the purpose and business case for a change initiative These three aspects will guide our focus on improving and and that the stated benefits are well constructed. Our recent strengthening the “employment handshake” and contribute to investment focus was on creating information technology the sustainable competitiveness of the group. infrastructure, capabilities and platforms with significant future leverage. These are now all evaluated and managed according to a Sustainability and stakeholders set methodology with defined qualitative and quantitative metrics. The necessary internal project management skills are being Capricorn Group’s commitment to sustainability means taking developed to ensure consistent implementation. a long-term, holistic view that considers the perspectives of all stakeholders. Our sustainability framework, which provides the Brand architecture structure and processes through which we are able to create enterprise-wide awareness and ensure aligned thinking and practices, The launch of the Capricorn Group’s new brand identity took place has been rolled out to Bank Gaborone and is in the process of being in September 2016. The external launch was preceded by the adopted by Cavmont Bank. Key non-financial indicators were internal introduction of the group’s new brand vision, proposition, established and management has started tracking key indicators. values and purpose – to be a connector of positive change – in Namibia, Botswana and Zambia. A stakeholder relationship management policy was approved by the board and a dedicated resource was appointed to monitor and guide In October 2016, the group’s brand and citizenship function was group-wide efforts. created with a specific focus on creating awareness of the group’s brand and proposition in the markets in which it operates, as well as Read more about our sustainability and stakeholder facilitating the embedding of the brand’s values through the launch process in the sustainability and ethics committee report of The Capricorn Way into all group entities. Additionally, the on page 88. department is responsible for the co-ordination of the roll-out of the group’s monolithic brand architecture to all brand entities in Namibia, Botswana and Zambia. This includes the finalisation, Capricorn Group became a signatory to the United Nations Global socialisation and training of and on all relevant corporate identity Compact in November 2016 and made a commitment to manuals, signage guides and messaging frameworks among others. implement the ten principles. In our next report, we will include practical examples of the ways in which we have contributed to As part of the process of implementing entity-specific elements of sustainable development, especially in terms of human rights, the brand architecture, a number of interventions were undertaken. labour, environment and anti-corruption. The interventions aim to ensure the smooth transition by entities from their current visual languages to the new group entity visual Digital channels languages as defined in the relevant new corporate identity manuals. Touchpoints include all entity websites, advertising, A group-wide digital strategy has been developed to structure and create the appropriate capacity to build a pipeline of continuous stationery and promotional items. and innovative solutions. Outcomes of this initiative include the launch of a Bank Windhoek mobile app, and the GoPay and All brand and citizenship initiatives aim to ensure the delivery of a EasyWallet offerings. strong, differentiated and reputable brand experience for employees and stakeholders.

INTEGRATED ANNUAL REPORT 2017 17 02 LEADERSHIP REPORT

Our regulatory landscape Governance and leadership As described in the material matters section on page 42, regulatory The succession plan for the role of chairman of our board has been change is impacting all areas and units in the group. Capricorn Group in place for some time – to ensure a responsible and smooth continues to prepare for the capital liquidity requirements of Basel III. transition. Accordingly, Johan Swanepoel, who was the vice- Our total risk-based capital ratio of 16.8% compares well with the chairman of Capricorn Group for the past 10 years, was appointed Bank of Namibia’s 10% requirement. The same applies for the Tier I as successor effective 1 July 2017. risk-based capital ratio requirement of 7%. Capricorn Group’s ratio for 2017 stands at 15.4%, which is well beyond the legislative Johan joined the group as managing director of Bank Windhoek in requirements. This provides a sufficient buffer to absorb credit losses. July 1999. We are confident that the group will continue to prosper under his very capable leadership. We also welcomed Dirk Reyneke as a new non-executive director on 19 May 2017 and look forward Read more about compliance in the governance report to his contribution. on page 58. The boards of CIHB and CCHZ continue to operate according to the existing governance structures, with synergies and skills transfer Risk management applied where relevant. With the 2017 strategy review and the integration between risk We continue to rely on the deep knowledge and experience of our management, stakeholder engagement and material matters board members across a variety of sectors. Their insights into local for value creation, the group has taken a more strategic approach and regional dynamics provide a competitive advantage, which is to risk. This approach follows the recognition that the enhanced by the track record of our leadership team. group has to be resilient and flexible in a complex and dynamic operating environment. As part of the restructuring of the group entities, which resulted in the acquisition of CIHB and CCHZ, we reviewed the overall organisational design, primarily to ensure that leadership Read more about the management and mitigation structures are best suited to serve the strategic intent of the group. of risks in the report on page 76. At the start of the financial year, Baronice Hans formally took over the position of managing director: Bank Windhoek from Christo de Vries, The group’s most significant compliance risks relate to the NSX having acted as managing director: designate from February last Listing Requirements, the Banking Institutions Act, anti-money year. This ensured a well-managed and smooth transition. laundering and labour legislation, tax, payment systems legislation and industry standards. We have also made a few further key appointments at Bank Windhoek, including the executive officer: human resources, Capricorn Group continues to monitor changing regulations, while who will be executing our employee value proposition, a new contributing directly and indirectly towards addressing the related executive for marketing and corporate communication services, risks to business and society. a new chief financial officer as well as a new chief operating officer. It has always been a social commitment for the group to ensure value creation for employees beyond short-term remuneration. This remains a key enabler to attract and retain critical skills for the group.

Refer to page 74 of the Remuneration Report for share appreciation rights and conditional shares awarded to qualifying employees.

18 CAPRICORN INVESTMENT GROUP LTD Dividends Appreciation A final dividend of 38 cents per ordinary share was declared on We would like to thank the board members of all our subsidiaries, 15 August 2017 for the year ended 30 June 2017 (2016: 36 cents). and the Capricorn Group board, in particular, for their undivided Considering the interim dividend of 30 cents per share, this commitment to the cause of our group and the direction and represents a total dividend of 68 cents per ordinary share for guidance they have provided. We have been through a period the year (2016: 66 cents per share). The group’s dividend policy of significant change, and relied on their ethical and strategic remains unchanged. leadership to create a sustainable future for the group.

Outlook We also thank our regional governments and societies for providing a receptive environment in which we, as a group, can To remain a catalyst for sustainable opportunities, we will use our continue to create value for our stakeholders. The consistent expanded regional base to enhance performance and customer growth and positive performance of the group can also be experiences substantially through leveraging and sharing our attributed to our loyal and expanding customer base, and the strengths. We have a strong capital foundation with a solid buffer continued commitment of our leadership and employees. We have against any liquidity challenges, combined with visible and engaged the scale, capacity, capability and infrastructure to create further leadership to drive growth. growth, connections and opportunities.

We believe that a sustainable future for the group will rely on Thinus Prinsloo Johan Swanepoel strategic partnerships and operational excellence informed by our Managing director Chairman four strategic choices.

Future growth will be driven mainly by market share opportunities in Zambia and Botswana. In Namibia, the focus will be more on client loyalty and retention through innovative offerings and digital enablers. Expanding our commercial offering is an area of potential growth in all jurisdictions.

Our challenges in the short to medium term are predominantly linked to the economic health of the region, the cost of funding, project cost and delivery. The GIPF transaction will make a significant difference to our long-term stability, although credit risk will remain. We are also encouraged by the steps the Namibian government is taking to improve economic viability and create more certainty against a backdrop of positive GDP growth in the region.

In all our business units we are re-engineering channels, coverage and service models by applying customer-centric principles. We are simplifying product offerings to gain market share and scale.

INTEGRATED ANNUAL REPORT 2017 19 02 LEADERSHIP REPORT

KOOS BRANDT’S MESSAGE OF FAREWELL

“It is my wish that all stakeholders come together to work collectively on solutions to secure a better future for the current and next generations. It is our responsibility to keep each other accountable and to work in the best interest of our country and its people.” – Koos Brandt, outgoing non-executive chairman

20 CAPRICORN INVESTMENT GROUP LTD I am deeply honoured and privileged to have led the Bank Windhoek Bank Windhoek has been the flagship brand of our group, lying and Capricorn Group boards since 1990 and 1996 respectively. close to my heart. Bank Windhoek has established itself as a proudly Over the years there were many highlights to report on in my Namibian bank, making a significant positive contribution to the chairman’s report for which I am very grateful. Our journey, which Namibian economy in a number of ways. I am confident that started in 1982 was, however, not always easy and predictable – management will continue to embrace this uniqueness and boldly with many challenges to overcome. Through perseverance, hard work be connectors of positive change in Namibia. Unfortunately, the and commitment of the board of directors, management and staff, importance of a strong and stable banking sector continues to be we have always managed to weather the storms. underestimated. One of the five pillars of banking sector stability is quality of earnings. Banks have to be profitable to remain financially I truly believe that the Bank Windhoek and Capricorn Group of strong and stable. Yet profits of banks are constantly scrutinised and today is a Namibian success story built on a strong foundation criticised without taking cognisance of the value that banks add to of integrity, ethics and accountability. Our group has a proven the economy through employment and the advancement of loans. track record for delivering sustainable, long-term value to its This stimulates the economy through direct and indirect taxes paid stakeholders by growing in a responsible manner and in the to government, social investment into communities and being a process making a meaningful contribution to the growth and trusted deposit taking institution. Another constraint that banks economic development of Namibia. continue to face is the shortage of skills in specific areas such as technology, risk and compliance. The expertise required to In stepping down as chairman, I am honoured to hand over the successfully operate a bank and to comply with all the regulations, reins to Johan Swanepoel, with whom I’ve been fortunate to work are often underestimated. very closely since 1996, the last ten years as my vice-chairman. I am confident that under the chairmanship of Johan, Capricorn I remain concerned about a number of social issues facing Group and all of its subsidiaries will continue to build on the legacy Namibia. It is my wish that all stakeholders come together to work of the past 35 years. He is an extremely capable and well-equipped collectively on solutions to secure a better future for the current leader, who has what it takes to take this group to the next level and next generations. It is our responsibility to keep each other of greatness. accountable and to work in the best interest of our country and its people. We should be mindful of the lessons of the past, while The concluding of the transaction with the GIPF in May 2017 creating a brighter future and build on what makes our country so signalled a new era for the group as GIPF became the second great – our strong sense of independence and patriotism, our largest shareholder in Capricorn Group. The direct and indirect ability to adapt and persevere, and to embrace diversity. benefits of having GIPF as a substantial shareholder for the Capricorn Group are immeasurable. As the largest institutional In conclusion, I would like to give a heart-felt thanks to the present investor in Namibia – with a very strong balance sheet – GIPF will and past boards of directors and managing directors with whom play a joint role as shareholder of reference for Capricorn Group. I had the privilege to work over the past 35 years. Thank you I am proud that the GIPF board recognised Capricorn Group as a for your invaluable support and guidance as well as contribution solid investment, as I believe that we subscribe to the same set to the success of our group. I would also like to thank the entire of values. This transaction will enable the group to increase its leadership and staff of the group, many of whom I have worked competitiveness and also creates a platform for the group to pursue with very closely over the years. I look forward to remain part new opportunities for diversification. It also enables the group to of Bank Windhoek and Capricorn Group by serving as a continue to serve the interests of our country and its people. non-executive director in the interests of our stakeholders.

INTEGRATED ANNUAL REPORT 2017 21